ClearBridge Investments, an investment management firm, published its “Mid Cap Growth Strategy” second quarter 2021 investor letter – a copy of which can be downloaded here. While the ClearBridge Mid Cap Growth Strategy trailed the benchmark in the second quarter, it had an absolute performance (+14.9%) and relative success (+445 bps over benchmark) year-to-date. You can take a look at the fund’s top 5 holdings to have an idea about their top bets for 2021.
In the Q2 2021 investor letter of ClearBridge Investments, the fund mentioned Chewy, Inc. (NYSE: CHWY) and discussed its stance on the firm. Chewy, Inc. is a Dania Beach, Florida-based pet food and other pet-related products retailer with a $28.6 billion market capitalization. CHWY delivered a -23.65% return since the beginning of the year, while its 12-month returns are up by 16.46%. The stock closed at $67.71 per share on September 29, 2021.
Here is what ClearBridge Investments has to say about Chewy, Inc. in its Q2 2021 investor letter:
“Some of our best performing holdings over the last several quarters took a pause during the strong up market in the second quarter. Chewy, which gave back some gains over fears that a return of pet owners to brick-and-mortar retailers will threaten the company’s e-commerce business. We maintain confidence Chewy will be able to maintain the customer relationships it established during pandemic lockdowns as well as expand into international markets.”
Photo by Tamara Bellis on Unsplash
Based on our calculations, Chewy, Inc. (NYSE: CHWY) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. CHWY was in 43 hedge fund portfolios at the end of the first half of 2021, compared to 32 funds in the previous quarter. Chewy, Inc. (NYSE: CHWY) delivered a -14.67% return in the past 3 months.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
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Disclosure: None. This article is originally published at Insider Monkey.
